CSEC Principles of Accounts P2 2016

TEST CODE 01239020
FORM TP 2016103 MAY/JUNE 2016
CARIBBEAN E XAM I NAT I O N S COUNCIL
CARIBBEAN SECONDARY EDUCATION CERTIFICATE®

EXAMINATION
PRINCIPLES OF ACCOUNTS
Paper 02 – General Proficiency
3 hours
READ THE FOLLOWING INSTRUCTIONS CAREFULLY.
1. Answer ALL questions in Section I and TWO questions from Section II.
2. Write your answers in the spaces provided in this answer booklet.
3. DO NOT write in the margins or above or below the question.
4. Show ALL working clearly.
5. You may use a silent, non-programmable calculator to answer questions.
6. You are advised to take some time to read through the paper and plan your answers.
7. If you need to rewrite any answer and there is not enough space to do so on the
original page, you must use the extra lined page(s) provided at the back of this
booklet. Remember to draw a line through your original answer.
8. If you use the extra page(s) you MUST write the question number clearly in
the box provided at the top of the extra page(s) and, where relevant, include
the question part beside the answer.
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.
Copyright © 2015 Caribbean Examinations Council

All rights reserved.
‘‘*’’Barcode Area”*”
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SECTION I
Answer the THREE questions in this section.
Write your answers in the spaces provided in this booklet.
1. Metevier and Moreno have been in partnership over the last year. Their partnership agreement
includes the following.
Interest on capital 10% per annum
Interest on drawings 5% per annum
(a) Other than the rate at which profit or loss is to be shared, name TWO other features
that may be included in a partnership agreement.
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(2 marks)
(b) Since the partnership agreement of Metevier and Moreno is silent, what rate should be
used to share the firm’s net profit or net loss?
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(1 mark)
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(c) Metevier and Moreno who contributed capital of $120 000 in the ratio of 7:5, recorded
the following balances on 31 December 2015.
$
Net profit before interest 77 404
Long-term liabilities (6% loan) 41 000 (interest not yet paid)
Drawings: Metevier 3 600
Moreno 1 920
Prepare the Profit Appropriation Account for Metevier and Moreno for the year ended
31 December 2015.
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(9 marks)

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(d) Other account balances recorded for Metevier and Moreno are as follows:
$
Fixed assets 220 000
Current assets 18 000
Current liabilities 48 576
Prepare the Statement of Financial Position (Balance Sheet) as at 31 December 2015 for
Metevier and Moreno showing clearly
(i) the firm’s working capital and
(ii) details of each partner’s earnings in the Capital section.
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(8 marks)
Total 20 marks
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2. (a) Tova Joyce, a sole trader, had already calculated her gross profit for the year ended
31 December 2015, but must make some changes to her accounting information. Complete
the required changes for Tova Joyce using the information set out below.
• Closing inventory was counted and valued at $8 670.
• Tova Joyce had withdrawn $900 in inventory for her personal use after the closing
inventory had been counted and valued.
• Goods valued at $185 were returned to the supplier on 31 December although they
had been included in the count and valuation of the closing inventory.
Use either the T-account format OR the lines below to show the changes needed to provide
a more accurate value for Tova Joyce’s closing inventory.
TOVA JOYCE
Revised Closing Inventory
Date Details $ Date Details $

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(4 marks)

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(b) Errors were also discovered in Tova Joyce’s bank records. The information is provided
below.
• The balance at bank showed an overdraft of $6 340 before the following items were
discovered.
• Additional equipment was bought by cheque on 01 January 2015 for $1 900 but had
not been recorded in the books of account.
• J. Lawrence, a debtor who owed Tova Joyce $430, sent a cheque for $200 and
indicated that he was unable to pay any more.
Compute the new bank overdraft balance.
TOVA JOYCE
Bank Account

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(3 marks)

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(c) Tova Joyce produces the following information for your consideration.
$ $
Old equipment 58 000
Gross profit before all changes and corrections 46 690
Insurance expense 320
On investigation, it was found that the following items also had not been properly recorded:
• Depreciation on old and new equipment had not been charged at the company’s
rate of 25% per year.
• The owner had donated $300 in cash to an animal shelter.
Calculate Tova Joyce’s net profit for the year ended 31 December 2015 after taking into
consideration all necessary changes and corrections.
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(5 marks)

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(d) Prepare the classified Statement of Financial Position (Balance Sheet) for Tova Joyce as
at 31 December 2015 based on
• the relevant information provided in Parts (a)‒(c)

• the revisions you have made and
• the additional balances provided.
Use the lines provided on page 11.
$ $
Buildings 46 100
Cash in hand 3 120
Equipment 58 000
Accounts receivable 6 910
Accounts payable 4 990

Capital 66 500

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(8 marks)
Total 20 marks
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3. In September, Grenade’s Cash Book showed an overdrawn balance of $3 400 which did not agree
with the balance on his bank statement. In checking his Cash Book with his bank statement
Grenade observed the following:
• A cheque paid to Blue for $1 238 was correctly entered in the bank statement but entered
in the Cash Book as $1 328.
• Bank charges for the month of $100 were entered on the bank statement but not in the Cash
Book.
• The bank paid Grenade’s insurance of $900 as instructed by standing order.
• Deposits of $8 000 made to the bank account on 29 September did not appear on the bank
statement.
• Dividends of $2 100 from Red Ltd was paid directly to Grenade’s bank account.
• Four cheques totalling $5 200 have not been presented to the bank for payment.

• A cheque for $300 received from Yellow on 02 September had been returned by the bank
for insufficient funds.
(a) (i) Prepare Grenade’s updated Cash Book for the month of September.
Grenade
Updated Cash Book as at 30 September
(9 marks)

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(ii) Prepare Grenade’s Bank Reconciliation Statement for the month of September.
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(4 marks)
(b) List TWO bank statement items which would be used to adjust the net income if the net
income was calculated before the bank statement was received.
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(2 marks)
(c) List ONE internal user and ONE external user of accounting information.
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(2 marks)

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(d) Complete the following table by stating the accounting concept or principle violated in
each given situation.
Situation Concept
A business owner pays the wage of his

housekeeper and charges it to business expenses.
A business owner plans to sell old equipment

next year at a profit of $6 000 but he records
that amount as profit in this year’s income
statement.

Every year a business owner uses different
methods to depreciate his non-current assets.
(3 marks)
Total 20 marks

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NOTHING HAS BEEN OMITTED.


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SECTION II
Answer any TWO questions in this section.
Write your answers in the spaces provided in this booklet.
4. Little People Furnishings is a manufacturer of table-and-chair sets for toddlers. The following is
a list of revenue and expenses for the year ended 31 December 2015.
Sales 278 800
Raw materials at 01 January 2015 5 000
Purchases of raw materials during the year 112 000
Finished table-and-chair sets on hand at 01 January 2015 66 000

Factory workers’ wages 48 000
Office workers’ wages 35 000
Plant and machinery at cost 92 000
Provision for depreciation on plant and machinery 18 400
Fixtures and fittings at cost 27 500
Provision for depreciation on fixtures and fittings 5 500
Repairs to fixtures and fittings 4 000
The following additional information was also provided at 31 December 2015:
• Raw materials at 31 December 2015 was valued at $90 000.

• Finished table-and-chair sets on hand were valued at $12 700.
• A licence fee of $2 per set is to be paid for each of the 12 900 sets manufactured this year.
• Plant and machinery are to be depreciated $7 360 for the year.
• Fixtures and fittings are to be depreciated at 20% per annum, using the straight line method.
All expenses related to fixtures and fittings are to be allocated 40% to the factory and 60%
to administration.

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(a) Prepare the Manufacturing Account for the year ended 31 December 2015, showing clearly
EACH of the following:
(i) Cost of raw materials used

(ii) Prime cost
(iii) Production cost
(11 marks)

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(b) Prepare the Income Statement for the year ended 31 December 2015, showing clearly:
(i) Gross Income

(ii) Net Income

(7 marks)

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(c) During the year ended 31 December 2015, Little People Furnishings manufactured a total
of 12 900 table-and-chair sets. Calculate the unit cost of production for the year.
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(2 marks)
Total 20 marks

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5. St James Sports and Cultural Club presented the following balances at 01 July 2014.
Owing for bar supplies 3 200
Subs in arrears 2 500
Premises at cost 150 000
Equipment at cost 70 000
Bar inventories 1 300
Subscription in advance 1 700
Loans to members 3 100
Provision for depreciation:

Premises 30 000
Equipment 22 000
Fees owing to bank 700
Bank 10 900
Cash 700
Periodicals and magazines 4 200

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(a) Prepare the Club’s Statement of Affairs as at 01 July 2014.

(7 marks)

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(b) The club has 320 members who pay $100 each as annual subscription. The following
information was extracted from the records for the year ended 30 June 2015.
01 July 2014 30 June 2015
Subscription in arrears $2 500 $1 400
Subscription in advance $1 700 $2 100
Prepare the subscription account for the year ended 30 June 2015, showing clearly:
(i) The amounts transferred to the Income & Expenditure Account
(ii) The payments received during the year

(7 marks)

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(c) The following information was extracted from the books of St Andrews Archery Club.
Receipts and payments account
Bar takings $12 450

Bar expenses $ 1 900
Inventory account
Opening $ 1 300
Closing $ 1 800
Additional information:
• Bar purchases totalled 3.5 times the average inventory for the year.
Prepare the bar’s Trading Account for the year ended 30 June 2015.
(6 marks)
Total 20 marks

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NOTHING HAS BEEN OMITTED.

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6. (a) List THREE essential features or principles of a cooperative.
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(3 marks)

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(b) Delcer High School had 1 650 students who were all members of the Delcer High School
Cooperative. Each student member purchased 10 shares at a cost of $10 per share. On
31 December 2015 the following data was extracted from the books of the cooperative.
Cash in hand and at bank 12 050
Accounts payable 1 600
Investments in other cooperatives 183 430
Non-current assets at cost 40 000
Statutory Reserve Fund at 01 January 2015 30 000
Education Fund at 01 January 2015 18 200
Undistributed surplus at 01 January 2015 7 450

Surplus made for the year 21 000
Additional information at 31 December 2015:
• Inventory of unsold goods was valued at $800.
• General expenses of $554 were unpaid.
• Interest due on investments totalled $7 524.
• The Board of Management decided to transfer from surplus made for the year to
Reserves as follows:
– 20% to the Statutory Reserve Fund

– 10% to the Education Fund
• Dividends were to be paid on members’ shares at the rate of 5% of their investment.

Using the form provided on page 27, prepare the Appropriation Account for the Delcer
High School Cooperative for the year ended 31 December 2015.

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(8 marks)

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(c) Prepare a Statement of Financial Position (Balance Sheet), using the vertical style, for the
Delcer High School Cooperative as at 31 December 2015.

(9 marks)
Total 20 marks

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7. Three employees working in the Gru Gru Country earned gross monthly income as follows:
S. Darbeau $4 800
E. Jacob $2 400
R. Sharpe $8 000
In Gru Gru Country, the first $2 500 earned in treated as non-taxable income. Earnings above
$2 500 is subject to tax at various rates as follows:
Taxable income between $1 and $2 500 0%
Taxable income between $2 501 and $5 000 15%
Taxable income between $5 001 and over 30 %

(a) Using the form provided below, calculate the income after tax for each employee.
Gross Non-Taxable Taxable Applicable Income

Name Income Tax
Income Income Income Tax Rate After Tax
S. Darbeau
E. Jacob
R. Sharpe
(7 marks)

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(b) Other compulsory deductions from income include:
National Insurance 5% of Gross Pay
Health Insurance 4% of Taxable Income
Pension Contributions 1% of Gross Pay
Using the form provided below, calculate the net income for each employee.
Income National Health Pension Total

Name Net Pay
After Tax Insurance Insurance Contribution Deduction
S. Darbeau
E. Jacob

R. Sharpe
(8 marks)
(c) (i) Distinguish between statutory and non-statutory deductions.
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(2 marks)
(ii) Name THREE basic source documents of the payroll.
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(3 marks)
Total 20 marks
END OF TEST
IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.
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TEST CODE 01239020

FORM TP 2016103 MAY/JUNE 2016

CARIBBEAN E XAM I NAT I O N S COUNCIL

CARIBBEAN SECONDARY EDUCATION CERTIFICATE®

Paper 02 – General Proficiency

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

2. Write your answers in the spaces provided in this answer booklet.

3. DO NOT write in the margins or above or below the question.

4. Show ALL working clearly.

5. You may use a silent, non-programmable calculator to answer questions.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

Copyright © 2015 Caribbean Examinations Council

DO NOT WRITE IN THIS AREA

Answer the THREE questions in this section.

Write your answers in the spaces provided in this booklet.

Interest on capital 10% per annum

Interest on drawings 5% per annum

DO NOT WRITE IN THIS AREA

DO NOT WRITE IN THIS AREA

GO ON TO THE NEXT PAGE

Long-term liabilities (6% loan) 41 000 (interest not yet paid)

Drawings: Metevier 3 600

GO ON TO THE NEXT PAGE

DO NOT WRITE IN THIS AREA

Current assets 18 000

Current liabilities 48 576

(i) the firm’s working capital and

(ii) details of each partner’s earnings in the Capital section.

DO NOT WRITE IN THIS AREA

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• Closing inventory was counted and valued at $8 670.

Date Details $ Date Details $

GO ON TO THE NEXT PAGE

DO NOT WRITE IN THIS AREA

Compute the new bank overdraft balance.

Date Details $ Date Details $

DO NOT WRITE IN THIS AREA

GO ON TO THE NEXT PAGE

Old equipment 58 000

Gross profit before all changes and corrections 46 690

Insurance expense 320

GO ON TO THE NEXT PAGE

DO NOT WRITE IN THIS AREA

• the relevant information provided in Parts (a)‒(c)

Use the lines provided on page 11.

Cash in hand 3 120

Accounts receivable 6 910

Accounts payable 4 990

DO NOT WRITE IN THIS AREA

DO NOT WRITE IN THIS AREA

GO ON TO THE NEXT PAGE

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• The bank paid Grenade’s insurance of $900 as instructed by standing order.

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Date Details $ Date Details $

DO NOT WRITE IN THIS AREA

GO ON TO THE NEXT PAGE

GO ON TO THE NEXT PAGE

DO NOT WRITE IN THIS AREA